Wall Street moves cautiously as tech stocks swing after selloff, financials outperform

Major US stock indexes moved within narrow ranges in choppy trading on Tuesday following a long weekend, as heavyweight technology stocks weakened after an AI-led selloff, while the financial sector outperformed the broader market.

The S&P 500 information technology sector trimmed its losses and traded slightly higher, with gains in Nvidia and Apple limiting the impact of a decline in Microsoft shares.

AI pressure and fears over Chinese models

Concerns that artificial intelligence could disrupt existing business models triggered a selloff last week in software companies, brokerages, and trucking firms, pushing the three main Wall Street indexes to their largest weekly losses since mid-November.

Uncertainty increased with rising perceived risks from Chinese AI firms, after Alibaba on Monday unveiled a new AI model, Qwen 3.5, designed to carry out complex tasks independently.

Pressure on software stocks continued, with the broader S&P 500 software index falling 1.4%. CrowdStrike dropped 5%, Adobe lost about 2%, and Salesforce declined between 2% and 5%.

Art Hogan, chief market strategist at B Riley Wealth, said: “It’s an indiscriminate selloff across everything related to technology, with heavier focus on software and the risk of disruption for some application companies. When that kind of momentum builds, it becomes difficult to find stocks that can stand out for a while.”

Main index performance

The Dow Jones Industrial Average rose 33.25 points, or 0.07%, to 49,534.18.

The S&P 500 gained 0.63 points, or 0.01%, to 6,836.80.

The Nasdaq Composite fell 21.58 points, or 0.10%, to 22,525.09.

Banks lead gains

The financial sector stood out as a bright spot, with its S&P 500 sector index rising 1.2%, supported by gains of about 1.5% each in major banks including Goldman Sachs and JPMorgan Chase, which also helped lift the Dow Jones index.

By contrast, materials and energy shares declined, tracking weaker commodity prices.

Focus on the Fed’s preferred inflation data

Market attention this week is centered on the personal consumption expenditures report, the Federal Reserve’s preferred inflation gauge, for signals on the inflation path and its potential impact on the pace of rate cuts.

This comes after softer-than-expected consumer inflation data last week, which slightly strengthened bets on rate cuts this year.

Markets are currently pricing a 52% probability of a 25 basis point rate cut in June, up from about 49% a week earlier, according to CME’s FedWatch tool.

Several Federal Reserve officials, including Michael Barr and Mary Daly, are also scheduled to speak during the day.

Geopolitical developments and market breadth

On the geopolitical front, Iran and the United States reached an understanding during a second round of nuclear talks in Geneva, while stressing that more work is needed.

In market breadth indicators, declining stocks outnumbered advancers by 1.25 to 1 on the New York Stock Exchange, and by 1.28 to 1 on the Nasdaq.

The S&P 500 recorded 37 new 52-week highs versus 9 new lows, while the Nasdaq posted 62 new highs and 170 new lows.